In This Article
- The Triple Tax Advantage
- FHSA Contribution Limits
- FHSA vs RRSP Home Buyers' Plan vs TFSA
- Who Can Open an FHSA?
- Where to Open an FHSA
- What to Invest In Your FHSA
- Frequently Asked Questions
- Can I have both an FHSA and use the RRSP HBP?
- What happens if I never buy a home?
- Can I open an FHSA if I owned a home before?
- When should I open an FHSA?
The First Home Savings Account (FHSA) launched in April 2023 and is the most powerful registered account ever created for Canadian first-time homebuyers. It combines the best features of the RRSP (tax-deductible contributions) and TFSA (tax-free withdrawals) into a single account designed to help you save for your first home.
The Triple Tax Advantage
Tax-deductible contributions: Like an RRSP, FHSA contributions reduce your taxable income. A $8,000 contribution saves $2,000–$3,200 in taxes depending on your marginal rate.
Tax-free growth: All investment gains inside the FHSA grow completely tax-free — dividends, interest, and capital gains.
Tax-free withdrawal: Like a TFSA, withdrawals for a qualifying home purchase are completely tax-free. No repayment required (unlike the RRSP HBP).
FHSA Contribution Limits
Annual limit: $8,000. Lifetime limit: $40,000. Unused room carries forward (up to $8,000 per year). Example: if you contribute $5,000 in year 1, you can contribute up to $11,000 in year 2 ($8,000 + $3,000 carry-forward).
FHSA vs RRSP Home Buyers’ Plan vs TFSA
FHSA: Tax-deductible in, tax-free out. $40,000 lifetime. No repayment required. Must be first-time buyer.
RRSP HBP: Tax-deductible in, tax-free out. Up to $60,000. Must repay over 15 years. Must be first-time buyer.
TFSA: Not tax-deductible. Tax-free growth and withdrawal. No first-time buyer requirement. Room restored after withdrawal.
Who Can Open an FHSA?
Canadian resident, age 18+, have not owned a home you lived in during the current year or the previous four calendar years. Both you and your spouse/partner must qualify as first-time buyers.
Where to Open an FHSA
Questrade: Free ETF purchases, self-directed. Wealthsimple: Commission-free, fractional shares. EQ Bank: FHSA savings account at 4%+ for short-term savers. TD/RBC/BMO: Available at all big banks but with higher trading fees.
What to Invest In Your FHSA
Buying in 1–2 years: HISA or GIC — protect your principal. 3–5 years: Short-term bond ETF (ZST) or GIC ladder. 5+ years: Balanced ETF like VBAL (60/40) for moderate growth.
Frequently Asked Questions
Can I have both an FHSA and use the RRSP HBP?
Yes. You can use both for the same home purchase. A couple can access up to $200,000 tax-free: $80,000 from two FHSAs + $120,000 from two RRSP HBPs.
What happens if I never buy a home?
You can transfer FHSA funds to your RRSP tax-free (does not use RRSP room). Or you can withdraw the funds, but they become taxable income in that year.
Can I open an FHSA if I owned a home before?
Yes, as long as you did not own a home you lived in during the current year or the previous four years. If you sold your home 5+ years ago, you may qualify again.
When should I open an FHSA?
Open one as soon as possible, even if you are not sure you will buy. The account must be open for at least 1 year before you can make a qualifying withdrawal. Starting early gives you more time to accumulate room and grow your savings.